USD: The USD - Repatriation Only Just Starting ?
May-07 01:51
The BBDXY range overnight was 1216.34 - 1223.26, Asia is trading around 1219. The USD continues to be sold on any rallies, Asia has seen a small bounce on the news of a US-China meeting to be held in Switzerland.
- Jon Turek of JST Advisors via BBG - “ What is going on in Taiwan is very interesting in terms of where TWD can go but is also an extreme example of a larger point that I have been trying to make about the USD short case. In terms of global balance sheets, the imbalance is now on the asset side, not the liability side. And whether these moves in TWD reflect part of a political outcome or just realization that hedge ratios are too low, I don’t think it really matters. The imbalance has seemingly reached a tipping point. It is worth saying, Taiwan is the most extreme example of this with a NIIP position more than double domestic GDP, but I think it speaks well to this broader paradigm shift that seems to be happening in terms of global exposure to the US. The reaction function for Asian surplus countries has been very simple. Invest in US, allocate more to US and hedge less in FX. If any of these three things is changing, that is a big deal given the size of these flows. Even just adjusting hedge ratios is huge if the Lifers have been running ratios less than 60% on over $700bln of assets.”
- This adds weight to a market that was already bearish the USD as an overweight in US assets has begun to be reduced and Asia is now joining the fray.
- Resistance in the BBDXY is around 1230, the market failed here initially and price action suggests sellers will be around there once more. A move back through the Weekly support towards 1200 will see the move accelerate.
- Data : US FOMC
Fig 1: BBDXY Weekly Chart
Source: MNI - Market News/Bloomberg
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ASIA STOCKS: Korea’s Outflows Intensify.
Apr-07 01:49
Global Investors continue to withdraw from Korea with another day of significant outflow alongside Thailand.
- South Korea: Recorded outflows of -$1,283m Friday, bringing the 5-day total to -$4,436m. 2025 to date flows are -$8,530, m. The 5-day average is -$887m, the 20-day average is -$225m and the 100-day average of -$132m.
- Taiwan: Had inflows of +$19m as of the 2nd, with total outflows of -$3,124m over the past 5 days. YTD flows are negative at -$18,247. The 5-day average is -$625m, the 20-day average of -$505m and the 100-day average of -$256m.
- India: Had outflows of -$345m as of 3rd, with total inflows of $24m over the past 5 days. YTD flows are negative -$14,006m. The 5-day average is +$5m, the 20-day average of +$15m and the 100-day average of -$143m.
- Indonesia: Had inflows of $38m as of the 27/3, with total inflows of +$54m over the prior five days. YTD flows are negative -$1,830m. The 5-day average is +$11m, the 20-day average -$33m and the 100-day average -$34m
- Thailand: Recorded outflows of -$185m Friday, totaling -$202m over the past 5 days. YTD flows are negative at -$1,331m. The 5-day average is -$40m, the 20-day average of -$34m the 100-day average of -$19m.
- Malaysia: Recorded outflows of -$74m Friday, totaling -$195m over the past 5 days. YTD flows are negative at -$2,338m. The 5-day average is -$39m, the 20-day average of -$54m the 100-day average of -$37m.
- Philippines: Saw outflows of -$13m Friday, with net outflows of -$14m over the past 5 days. YTD flows are negative at -$229m. The 5-day average is -$3m, the 20-day average of +$1m the 100-day average of -$6m.
CHINA: Central Bank Drains Liquidity via OMO.
Apr-07 01:33
- The PBOC issued CNY93.5b of 7-day reverse repo at 1.5% during this morning’s operations.
- Today’s maturities CNY245.2bn
- Net liquidity withdrawal CNY151.7bn.
- The PBOC monitors and maintains liquidity in the interbank market through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted Average is at 1.53%, from Thursday’s close of 1.69%
- China’s overnight interbank repo rate is 1.79%, from Thursday’s close of 1.70%.
- China’s 7-day interbank repo rate is 1.70%, unchanged.
US TSYS: Cash Bonds Sharply Richer But Off Bests
Apr-07 01:29
TYM5 is stronger at 113-18, +16+ from closing levels in today's Asia-Pac session, but well off today’s high of 114-10.
- According to MNI's technicals team, focus for TYM5 is on technical resistance at 114-16 (2.000 proj of the Jan 13 - Feb 7 - Feb 12 price swing) after having breached round number resistance (114-03.5 high) on Friday.
- Cash US tsys are 4-14bps richer in Asia-Pac session after Friday’s solid gains.
- S&P 500 futures have pared their decline to less than 3% in today's Asia-Pac session from -5.4% earlier.
- Nevertheless, global markets realise that President Trump's tariff policies are not just a US problem and that a US recession has serious implications for global growth. A raft of Asian economies have reached out to the US looking to remove either levies on US imports or open trade talks. However, China unveiled a 34% duty on all US imports. This remains front centre in the minds of market participants as they attempt to digest the implications of this in the Asian session.
- On Friday, March jobs printed higher-than-expected but this gain was tempered slightly by a down-revision to the prior. The latest profile saw 228k after two weak months (111k Jan, 117k Feb) which in turn followed two booming months (261k Nov, 323k Dec).
